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Supermarkets put their hope in ‘frugality fatigue’

Industry leaders say consumers are starting to tire of buying bottom-range goods and are going back up the value chain.

The trend is most noticeable in wine and bread, but also in household products such as toilet paper.

In a closed session at the Food & Grocery Council’s annual conference in Melbourne last week, the head of one supermarket chain, who cannot be identified, revealed its house brand products were receding, while the other major chain said its private brands “were not the most important things in our lives”.

It is customary for these sessions, featuring the major retailers, to remain private for quoting purpose. Both presentations were also not seen by the competing organisations. 

The sessions came after the latest retail trade figures, for the September quarter, showed supermarket and grocery sales and volumes continuing to fall.

Driven by cheaper dairy products, sales fell 1.6% and volumes were down 1.5%.

Low economic growth and a barely rising population are holding down future prospects. Grocery units, for example, were up 0.2% in the past year, one chain’s figures reveal. 

Meanwhile, food prices are continuing to decline as shoppers’ baskets buy more for less.

The private brands tailing off has coincided with heavier promotions of leading brands, which now account for 57% of all sales, the Food & Grocery Council revealed earlier this year.

House brands at one chain are no more than 16% of sales compared with overseas trends, where they are running as high as 30%. House brand products are also subject to high churn, with poor-selling lines culled quickly.

In addition, expect house brands to move into new territories, such as produce, the conference was told.

More by Nevil Gibson

Comments and questions

We can't buy very "high up the value chain" in NZ with the limited range in the supermarket duopoly stores. Farro and Nosh offer some relief but I guess their supplers don't want to deal with the duopoly.

What do you expect when a certain outfit pitches their own brand prices just a few cents below the top of the range product, if the difference is not worth it we won't do it pure and simple.
Have you noticed that with electronic price ticketing the prices change daily, and come Fri,Sat & Sun the prices are up in the clouds.
The owner operators think most of us are stupid, but in actual fact most of us are right onto their dirty rotten tricks, they are all on huge incomes, I used to be a department manager in a supermarket some time ago now, but nothings changed since.

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